Interest-Bearing Tokens Explained (InterestBearingMint Extension)

An interest-bearing token looks like it's paying yield just by sitting in your wallet — the balance shown ticks upward over time with no transaction, no claim button, nothing to sign. It's a real Token-2022 extension, InterestBearingConfig, and understanding what it actually does (and doesn't do) matters before you build one or hold one.

It's a display calculation, not a transfer

This is the single most important thing to understand: InterestBearingConfig does not mint new tokens into your account, and no SOL or tokens move on-chain when the "interest" accrues. What actually happens is that the mint stores an interest rate, and any wallet or application reading the balance applies a continuous-compounding formula — based on the rate and how much time has passed since the account was last touched — to compute a displayed amount that's larger than the raw on-chain balance.

The raw token count in your account doesn't change. What changes is what gets shown to you, calculated fresh every time something reads it.

Why build it this way

The alternative — actually minting new tokens to every holder continuously — would require either a trusted off-chain process running forever, or a per-holder claim transaction, both far more complex and costly than a formula every client can compute independently. Making it a pure calculation means the "interest" is consistent everywhere instantly, with zero ongoing transaction cost, and zero trust required in anyone to keep running a payout job.

What you're actually setting

At creation, InterestBearingConfig takes an annual interest rate in basis points, and can be positive (balance display grows) or negative (balance display shrinks — useful for modeling something like a decaying voucher). It also requires a rate authority — the key allowed to change the rate later. As with any live authority, whoever holds it can adjust the rate at will unless it's revoked, so the same trust questions that apply to mint and freeze authority apply here.

What it means for holders

The number your wallet shows is not redeemable at face value anywhere the underlying accounting doesn't also apply the same formula — it's a display convention that well-behaved Token-2022-aware software respects, not tokens you can peel off and spend at the inflated count. If you're evaluating a token using this extension, the real question is what backs the implied yield, not the extension itself; the extension just computes a number, it says nothing about whether that number is backed by anything.

Building one

Solstack's Token-2022 Creator sets the interest rate as part of mint creation — enter an annual rate (positive or negative) and it's active from the first block the mint exists. Full steps, including how it combines with the mint's other extensions, are in the Token-2022 Creator docs.